Michigan Supreme Court
Lansing, Michigan 48909
____________________________________________________________________________________________
C hief Justice Justices
Maura D. Cor rigan Michael F. Cavanagh
Opinion
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
____________________________________________________________________________________________________________________________
FILED MAY 14, 2002
WPW ACQUISITION COMPANY,
Plaintiff-Appellant,
v No. 118750
CITY OF TROY,
Defendant-Appellee.
____________________________________
BEFORE THE ENTIRE BENCH
TAYLOR, J.
Underlying this case is the adoption of the “Proposal A”
amendment of the Michigan Constitution at the special election
held on March 15, 1994. In particular, Proposal A added
language to Const 1963, art 9, § 3 that generally limits
annual increases in property tax assessments on a parcel of
property as long as that property is owned by the same party.
However, Proposal A allows the value of property to be
adjusted for “additions” without regard to this cap. At issue
is the constitutionality of a statutory provision, MCL
211.34d(1)(b)(vii), that purports to include, in certain
circumstances, an increase in the value of property because of
increased occupancy by tenants within the meaning of
“additions.” We conclude that this statutory provision is
unconstitutional because it is inconsistent with the meaning
of the term “additions” as used in Proposal A.
I
In 1991, before the ratification of Proposal A, plaintiff
WPW Acquisition Company was granted by defendant city of Troy
a decrease in the assessed value of the parcel of property
that included the office building at issue. At all relevant
times, this property has been owned by WPW.
In 1996, after the passage of Proposal A, Troy increased
its determination of the assessed “taxable value” of the
parcel of property, and thus its property tax assessment, by
over thirteen percent.1 Apparently, this increased assessment
was tied to an increased occupancy of the office building by
tenants. WPW protested this assessment as violative of the
provision of the Proposal A constitutional amendment, codified
at Const 1963, art 9, § 3, that generally limits annual
increases in the assessed taxable value of a parcel of
1
The taxable value assessed by Troy in 1995 was
$6,545,970. In 1996, it was increased to $7,434,940.
2
property to the lesser of five percent or the increase in the
“general price level” for the immediately preceding tax year.
However, Troy took the position that the increased assessment
was permitted by language in the constitutional amendment
allowing adjustments for “additions” and a subsequently
enacted statutory provision, MCL 211.34d(1)(b)(vii), which
defines “additions” to include, in some circumstances,
increases in the value of property attributable to an
increased occupancy rate.
After the Michigan Tax Tribunal ruled in favor of Troy
with regard to the assessment, WPW brought this action in the
circuit court, challenging the constitutionality of the
pertinent statutory provision, MCL 211.34d(1)(b)(vii). The
circuit court held that this statutory provision was
unconstitutional as an attempt by the Legislature to change
the meaning of “additions” as used in the Michigan
Constitution from the meaning established by the relevant
statute when Proposal A was passed.2 The Court of Appeals
reversed, holding that the constitutional amendment left the
meaning of “additions” to the Legislature “to define,
consistent with the ratifiers’ intent” and that the
2
However, the circuit court denied WPW’s request that it
order a corresponding tax refund in its favor on the ground
that calculation and award of such a tax refund was within the
exclusive jurisdiction of the Tax Tribunal.
3
Legislature had done so in a reasonable manner in the
pertinent statutory provision. 243 Mich App 260; 620 NW2d 883
(2001). We granted WPW’s application for leave to appeal.
II
The Michigan Constitution, Const 1963, art 9, § 3
provides in pertinent part with regard to taxation of real
property:
The legislature shall provide for the uniform
general ad valorem taxation of real and tangible
personal property not exempt by law except for
taxes levied for school operating purposes. The
legislature shall provide for the determination of
true cash value of such property; the proportion of
true cash value at which such property shall be
uniformly assessed, which shall not, after January
1, 1966, exceed 50 percent; and for a system of
equalization of assessments. For taxes levied in
1995 and each year thereafter, the legislature
shall provide that the taxable value of each parcel
of property adjusted for additions and losses,
shall not increase each year by more than the
increase in the immediately preceding year in the
general price level, as defined in section 33 of
this article, or 5 percent, whichever is less until
ownership of the parcel of property is transferred.
When ownership of the parcel of property is
transferred as defined by law, the parcel shall be
assessed at the applicable proportion of current
true cash value. [Emphasis added.]
The emphasized language, which is central to the present case,
was part of the language added to this constitutional
provision by the Michigan electorate in ratifying Proposal A.
As is plain, this language operates to generally limit
increases in property taxes on a parcel of property, as long
as it remains owned by the same party, by capping the amount
4
that the “taxable value” of the property may increase each
year, even if the “true cash value,” that is, the actual
market value, of the property rises at a greater rate.
However, a qualification is made to allow adjustments for
“additions.” Resolution of the present case turns on the
meaning of the term “additions” as used in the emphasized
constitutional language.
When Proposal A was adopted (that is, on March 15, 1994),
the General Property Tax Act defined “additions” to mean
all increases in value caused by new construction
or a physical addition of equipment or furnishings,
and the value of property that was exempt from
taxes or not included on the assessment unit’s
immediately preceding year’s assessment role. [MCL
211.34d(1)(a), as then in effect.]
Obviously, this definition did not encompass any increases in
occupancy by tenants in a building within the meaning of the
term “additions.”
However, after the pertinent constitutional language was
added to § 3 by the ratification of Proposal A, the
Legislature enacted amendments of MCL 211.34d(1)(b)(vii) that
state in pertinent part:
As used in this section or . . . section 3
. . . of article IX of the state constitution of
1963 [that is § 3 of the constitutional provision
at issue]:
* * *
(b) For taxes levied after 1994, “additions”
means, except as provided in subdivision (c), all
5
of the following:
* * *
(vii) An increase in the value attributable to
the property’s occupancy rate if either a loss, as
that term is defined in this section, had been
previously allowed because of a decrease in the
property’s occupancy rate or if the value of new
construction was reduced because of a below-market
occupancy rate.
Troy relied on this statutory provision in increasing
WPW’s taxable value for the office building at issue by over
thirteen percent in 1996 on the ground that this was based on
an increase in occupancy covered by the statute and, thus, on
an “addition” that was not subject to the general limit on
annual property tax increases imposed by § 3.
However, we agree with WPW that MCL 211.34d(1)(b)(vii) is
unconstitutional in purporting to define “additions” for
purposes of § 3 in a way that is inconsistent with the
established meaning of that term at the time that it was added
to this constitutional provision by the passage of Proposal A.
This is because “if a constitutional phrase is a technical
legal term or a phrase of art in the law, the phrase will be
given the meaning that those sophisticated in the law
understood at the time of enactment unless it is clear from
the constitutional language that some other meaning was
intended.” Michigan Coalition of State Employee Unions v
6
Civil Service Comm, 465 Mich 212, 223; 634 NW2d 692 (2001).3
At the time that Proposal A was submitted to the voters, the
General Property Tax Act established “additions” as a
technical legal term in the area of property taxation. As we
discussed above, that statutory definition of “additions”
simply did not encompass any increase in the value of property
due to increased occupancy by tenants.
Further, there is no indication when one examines the
purposes of the property tax limitation amendment to conclude
that another more expansive meaning of “additions” was
intended.4 On the contrary, the opposite appears to be the
case. The amendment generally was to not allow the taxable
value to increase above the “cap” regardless of any larger
increase in true market value until the property was
transferred. The blanket bar was tempered, however, by
allowing for adjustments for additions. If what the amendment
had done was empower the Legislature, at its will, to define
an increase in the value of property (such as an increase due
3
See also People v Pickens, 446 Mich 298, 310-311; 521
NW2d 797 (1994), quoting 1 Cooley, Constitutional Limitations
(8th ed), p 132 (“technical words” and “words of art” in a
constitution should be considered “to be employed in their
technical sense”).
4
As we observed in Federated Publications, Inc v
Michigan State Univ Bd of Trustees, 460 Mich 75, 85; 594 NW2d
491 (1999), “we often consider the circumstances surrounding
the adoption of [a constitutional] provision and the purpose
it is designed to accomplish.”
7
to increased occupancy) to be classified as an “addition,”
then the property tax limiting thrust of § 3 would be, or
could soon be if the Legislature desired it, thwarted. To
adopt Troy’s position regarding legislative power to amend the
meaning of terms understood at the time of ratification, would
be to assume the drafters and ratifiers of this amendment
desired to place a convenient sabotaging clause within this
tax limitation amendment that could be triggered whenever the
Legislature chose. Such a skewed view of the intent, to say
nothing of the capabilities, of the drafters and ratifiers,
should be rejected. Moreover, to adopt such a mode of
interpretation would, when applied in the future to other
constitutional language, hollow out the people’s ability to
place limits on legislative power. In short, to recognize
such an expansive legislative power to redefine constitutional
terms is inconsistent with the constitution’s supremacy over
statutes. See Marbury v Madison, 5 US (1 Cranch) 137; 2 L Ed
60 (1803). Against this background, we see no principled way
to determine the meaning of “additions” as used in § 3 except
by considering it as a term of art that must be construed in
conformity with the meaning of “additions” as used in the
General Property Tax Act at the time that Proposal A was
8
adopted.5
Further, the position that Troy urges upon us, that the
ultimate definition of “additions” in § 3 was committed to the
Legislature,6 also runs counter to the principle that
construing the meaning of constitutional language is a basic
judicial function. See Lewis v Michigan, 464 Mich 781, 788
789; 629 NW2d 868 (2001) (reviewing a statute for its
constitutionality is “a core judicial function”); House
Speaker v Governor, 443 Mich 560, 575; 506 NW2d 190 (1993),
quoting Baker v Carr, 369 US 186, 211; 82 S Ct 691; 7 L Ed 2d
(1962) (describing this Court as the “ultimate interpreter of
the [Michigan] Constitution”). Moreover, the pivotal sentence
in § 3 states:
5
Troy emphasizes its view that WPW essentially got a tax
break when the assessed value of the property was lowered in
1991 on the basis of a decrease in occupancy, and that the
increase in value in 1996 was fair because it corresponded to
an ensuing increase in occupancy. While WPW disputes this
view with the contention that the decreased assessment in 1991
simply reflected a decline in market value, the point is
simply immaterial to our analysis. Nothing in the language of
§ 3 and, in particular, nothing in the established meaning of
“additions” at the time Proposal A was passed allows for an
increase in the taxable value of property beyond the general
cap established by Proposal A on the basis of such a prior
reduction in assessed value.
6
Troy states in its brief:
The Michigan Constitution, however, does not
specifically define additions and losses, and
therefore the legislature was left to format the
commonly understood meaning of these terms into
legislation.
9
For taxes levied in 1995 and each year
thereafter, the legislature shall provide that the
taxable value of each parcel of property adjusted
for additions and losses, shall not increase each
year by more than the increase in the immediately
preceding year in the general price level, as
defined in section 33 of this article, or 5
percent, whichever is less until ownership of the
parcel of property is transferred.
This language clearly imposes an obligation on the Legislature
to provide implementing legislation for a general limitation
on the increase in taxable value of parcels of property. It
cannot be distorted into allowing the Legislature to
periodically alter the meaning of “additions.” That such a
limit on legislative power should be understood is underscored
by the immediately following sentence in § 3, which provides:
When ownership of the parcel of property is
transferred as defined by law, the parcel shall be
assessed at the applicable proportion of current
true cash value. [Emphasis added.]
This language shows that the drafters of the proposal knew how
to commit the definition of certain terms to the Legislature,
in this instance, what constitutes a transfer. That no such
legislative authority was granted with regard to the term
“additions” reinforces the lack of such a commitment to allow
the Legislature this power.
For these reasons, we disagree with the essential premise
of the Court of Appeals in this case that § 3 “left it to the
Legislature to define” the term “additions.” Therefore, we
hold that MCL 211.34d(1)(b)(vii) is unconstitutional because
10
it purports to define the term “additions” for purposes of § 3
in a way that violates the proper meaning of that term.7
It follows from our analysis that Troy’s decision in
1996, in reliance on this unconstitutional statutory
provision, to increase the assessment on the office building
at issue by far more than five percent, solely on the basis of
increased occupancy, facially violated the cap on annual
increases in taxable value imposed by § 3. Thus, we reverse
the holding of the Court of Appeals.
III
In light of its holding rejecting WPW’s constitutional
challenge to MCL 211.34d(1)(b)(vii), the Court of Appeals
expressly declined to reach the issue whether the circuit
court had jurisdiction to order a tax refund premised on the
unconstitutionality of that statutory provision. Accordingly,
we remand this case to the Court of Appeals for initial
consideration of that issue.8
7
WPW also argues that this statutory provision violates
the “uniformity” requirement of the first sentence of Const
1963, art 9, § 3, which states in pertinent part, “The
legislature shall provide for the uniform general ad valorem
taxation of real and tangible personal property . . . .”
However, in light of our analysis holding MCL
211.34d(1)(b)(vii) to be unconstitutional on other grounds, it
is unnecessary to consider that question.
8
While the parties argue this matter here, we consider
it most appropriate to allow the Court of Appeals to review it
in the first instance.
11
The opinion of the Court of Appeals is reversed. This
case is remanded to that Court for further proceedings
consistent with this opinion.
CORRIGAN , C.J., and WEAVER , YOUNG , and MARKMAN , JJ., concurred
with TAYLOR , J.
12
S T A T E O F M I C H I G A N
SUPREME COURT
WPW ACQUISITION COMPANY,
Plaintiff-Appellant,
v No. 118750
CITY OF TROY,
Defendant-Appellee.
___________________________________
CAVANAGH, J. (concurring).
The people of this state adopted Proposal A, which
amended Const 1963, art 9, § 3 by limiting the tax increase
that could be imposed on property tax assessments. The
amendment permits an increase in excess of this cap if the
property valuation is adjusted for “additions.” I agree with
the majority’s conclusion that the Legislature impermissibly
redefined “additions” in this instance. However, I write
separately to express my concern with the majority’s
overzealous condemnation of the Legislature’s attempt to enact
the provisions of the constitutional amendment and to caution
against its constitutional analysis that suggests the
undertaking lacks complexity.
I agree with the majority that the Legislature may define
constitutional terms when permitted by the text. Because the
revised definition significantly expands the articulated
exceptions to the cap on tax increases, it conflicts with the
original intent of the ratifiers. This legislative
overreaching is particularly evident because we are close in
time to the passage of the amendment, and we must assume the
ratifiers intended any exceptions to the cap on tax increases
be narrowly construed. However, contrary to what the majority
implies, even if this Court determined that the text of the
amendment expressly permits the Legislature to define the
term, its design could not be thwarted because this Court
would still be required to invalidate any definition that
violated the purpose of the amendment. The Legislature can
never unconstitutionally define a term in the constitution.
Though the issues this case presents are far from
complex, the nature of constitutional interpretation is rarely
so straightforward. Simply stated, the value of original
intent as one method among many in the endeavor to properly
interpret our constitution must be appreciated. With that
qualification, I respectfully concur.
KELLY , J., concurred with CAVANAGH , J.
2